Weekly Thoughts 14 November 2014

At the end of October, a client brought to my attention an article in Moneyweb that he thought I might find interesting. It was an independent report on the performance of General Equity unit trust funds in South Africa over the past three months, when there had been this bit of ‘up and down’ on the markets. The writer, quite rightly so, emphasized that one shouldn’t put too much importance on such short term figures but said that such results can be quite revealing. The JSE had fallen around 8% during this time and one might expect to find equity funds taking a similar hit. He showed the results of funds that had not suffered as much, particularly those that had not suffered capital loss at all in terms of price. Marriott’s Dividend Growth Fund was the top of this list, with a positive figure of 1.29% for the three months.

This fund does not aim to achieve the best capital growth, but rather sustainable, increasing dividends. But it does speak to Marriott’s strategy of investing for income, while knowing that price will follow. This fund makes up the SA Equity portion of the Prudential and Worldwide Funds and I also have many of you running debit orders directly into the Dividend Growth Fund, (myself included) for quarterly retirement income one day. I will never be advising you to liquidate this fund, rather to enjoy the dividend. Which therefore makes the value irrelevant. We’d actually all be better off if the fund wouldn’t go and do so well on price because our next debit orders would buy more, rather than fewer units and therefore increased dividends!! But it’s just good to know that their strategy holds its own in many cycles.

The saying goes, that in a rising tide all boats rise. But its when the tide goes out that you see who was swimming without their bathing trunks!